How to Buy a House in Tennessee

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• 🏡 26% of first-time homebuyers in 2023 relied on financial help from family or friends to afford a down payment.
• 📉 A 1% lower mortgage rate can save buyers over $2,000 per year on a $300,000 loan.
• ⚖️ New NAR rules in 2024 now require written buyer-broker agreements. This changes how commissions are negotiated.
• 🧾 Tennessee homebuyers should plan for closing costs. These are 2–5% of the purchase price and are in addition to your down payment.
• ⚠️ Commission rebates are illegal in Tennessee, but legal alternatives exist that provide the same savings at closing.

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📍 Find Your State

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How to Buy a House in Tennessee in 2025: An 11-Step Guide + Savings Tips

Buying a house in Tennessee in 2025 means dealing with a changing real estate market. With the state’s median home price at $394,400 and commission rates averaging 6%, understanding Tennessee-specific strategies is crucial. While commission rebates are illegal in Tennessee, legal workarounds and state programs like the Great Choice Home Loan can help you save thousands. This guide walks you through buying a home in the Volunteer State, from getting ready financially to closing day in cities like Nashville, Memphis, Knoxville, and Chattanooga.

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Step 1. Save for a Down Payment in Tennessee

Saving for a down payment is the first big step in buying a house in Tennessee. In 2025, with the state’s median home price at $394,400, you’ll need to prepare more cash than in many other states. Tennessee’s zero state income tax helps, but home prices in markets like Nashville and Knoxville have risen significantly. Saving wisely and picking the right loan are more important than ever.

Loan Type	Minimum Down Payment	Recommended Credit Score
Conventional	3–5%	620+
FHA	3.5%	580+ (or 500 w/ 10% down)
VA	0%	620+
USDA	0%	640+

💡 What it means for Tennessee buyers: On a $394,400 home (Tennessee’s median):

• 3% down = $11,832
• 5% down = $19,720
• 10% down = $39,440

This amount does not cover closing costs, inspections, or money for emergencies. Many Tennessee lenders suggest you plan for another 2–5% of the home’s price.

Tennessee offers robust down payment assistance (DPA) programs through the Tennessee Housing Development Agency (THDA):

• Great Choice Plus – Up to $10,000 in forgivable or amortizing second mortgage assistance
• Homeownership for Heroes – Reduced interest rates for military, veterans, EMTs, paramedics, firefighters, and law enforcement
• NeighborhoodLIFT (Nashville) – Up to $15,000 in forgivable assistance
• Local programs – Cities like Memphis, Chattanooga, and Knoxville offer additional grants up to $25,000

Tennessee’s programs require completion of a THDA-certified homebuyer education course and typically require a minimum 640 credit score. You can combine these programs with the legal commission savings alternatives available in Tennessee (see Step 10).

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Step 2. Get Pre-Approved for a Mortgage in Tennessee

Before you start house hunting in Tennessee, getting a mortgage pre-approval is very important. It tells you how much you can afford in Tennessee’s competitive markets like Nashville ($423,694 median) or Memphis. And it shows sellers you are a serious buyer.

To get pre-approved, you’ll submit:

• The last 2 years of tax returns and W-2s
• 2–3 months of recent pay stubs
• Credit report (lender will request)
• Asset and bank statements

☑️ A strong credit score helps you qualify for lower rates. Small credit improvements now can save thousands later in Tennessee’s market:

• Raising your score from 650 to 700 could reduce your interest rate by 0.5%–0.75%, potentially saving you over $100/month on your mortgage payment on a $394,400 home.

🛑 Avoid these mistakes:

• Opening new credit cards during mortgage evaluation
• Making major purchases (e.g., car or furniture)
• Switching jobs suddenly without informing your lender

Important for Tennessee buyers: Since commission rebates are illegal in Tennessee, you’ll need to work with lenders who understand and approve the legal alternative structures that Tennessee agents use to provide equivalent savings. THDA-approved lenders are familiar with these arrangements and can guide you through the process.

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Step 3. Find a Local Real Estate Agent in Tennessee

As of 2024, real estate rules are now stricter in Tennessee: you must sign a buyer-broker agreement before submitting offers. These new rules come from the National Association of Realtors (NAR). They focus on being clear about how agents get paid.

🔍 What to look for in a Tennessee agent:

• 🗺️ Knows Tennessee’s local markets very well (Nashville, Memphis, Knoxville, Chattanooga, etc.)
• 💬 A good negotiator who often wins offers in Tennessee’s competitive market
• 💸 Understands Tennessee’s rebate prohibition and can structure legal savings alternatives
• 🔑 Can find private listings, off-market deals, and Tennessee-specific lenders

Ask your Tennessee agent:

• “How familiar are you with Tennessee’s commission rebate laws and legal alternatives?”
• “Can you structure a reduced commission arrangement that complies with Tennessee regulations?”
• “Do you work with THDA-approved lenders who understand these savings structures?”
• “What neighborhoods in [Nashville/Memphis/Knoxville/Chattanooga] offer the best value?”

Understanding Tennessee’s Rebate Prohibition:

Tennessee is one of only 9 states where direct commission rebates to buyers are illegal. However, Tennessee agents have developed a legal workaround: instead of a rebate, they can reduce their commission and require the seller to contribute that difference toward the buyer’s closing costs. This achieves the same financial benefit while complying with Tennessee law.

For example, on a $394,400 home where the seller offers 3% buyer agent commission ($11,832), a Tennessee agent might:

• Accept only 2% commission ($7,888)
• Require the seller to credit the 1% difference ($3,944) to the buyer’s closing costs
• Result: Same $3,944 savings for the buyer, fully legal in Tennessee

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Step 4. Start House Hunting in Tennessee

Once you have a Tennessee agent and pre-approval, you can start looking at homes. In 2025, Tennessee’s market shows 6.16 months of inventory with a median sale price of $394,400. Homes in Tennessee average 61-73 days on market, giving buyers more time to evaluate properties compared to peak pandemic years.

🎯 Focus on Tennessee priorities:

• Location – Tennessee’s major metros (Nashville, Memphis, Knoxville, Chattanooga) vs. rural areas
• Property taxes – Vary significantly by county; Tennessee has no state income tax but property tax rates differ
• Commute – Nashville traffic and I-40/I-65/I-24 corridor considerations
• Schools – Tennessee districts vary widely in quality and funding
• Flood zones – Important near rivers and in areas like Memphis and Nashville

📍 Tennessee Market Conditions (2025):

• Nashville: Median $423,694 – Still growing but cooling from peak
• Memphis: More affordable market with strong value
• Knoxville: Saw 93% growth over 5 years, now stabilizing
• Chattanooga: Growing tech hub with increasing demand
• Clarksville: Strong military presence, steady demand

✅ Tennessee-specific things to check:

• Property condition (Tennessee weather extremes can cause foundation and roof issues)
• HVAC age and condition (important in Tennessee’s hot, humid summers)
• Basement/crawl space moisture (common in Tennessee)
• Proximity to tornado-prone areas
• HOA rules in Tennessee subdivisions
• Internet availability in rural Tennessee areas

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Step 5. Make an Offer in Tennessee

When you find the right home in Tennessee, your agent helps you make an offer. In Tennessee’s current market (6.16 months inventory), buyers have more negotiating power than during the pandemic years. Only 14.1% of Tennessee homes sold above list price in 2025, down from previous years.

💵 Tennessee offer components:

• Purchase price – Based on Tennessee comps and recent sales
• Earnest money deposit – Typically 1-2% in Tennessee ($3,944-$7,888 on median home)
• Contingencies – Inspection, appraisal, financing, and sale of current home
• Closing date – Usually 30-45 days in Tennessee
• Seller concessions – Can include closing costs, repairs, or home warranty

🏆 Ways to make your Tennessee offer stronger:

• Higher earnest money – Shows commitment in Tennessee’s market
• Shorter contingency periods – Tennessee sellers appreciate quick closings
• Pre-approval letter from THDA-approved lender – More credible to Tennessee sellers
• Flexible closing date – Work with seller’s Tennessee moving timeline
• Write a personal letter – Tennessee sellers often value personal connections

⚖️ Understanding commission savings in your Tennessee offer:

When your agent structures a reduced commission arrangement, they’ll include language in the offer specifying that the commission reduction difference must be credited toward your closing costs. This is standard practice in Tennessee and is fully legal. Tennessee sellers are familiar with this structure, though your agent should explain it clearly.

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Step 6. Schedule a Home Inspection in Tennessee

After your Tennessee offer is accepted, schedule a home inspection within 7-10 days. A good inspection costs $300-$600 in Tennessee and can save you thousands by finding hidden issues before you commit.

🔍 Tennessee-specific inspection priorities:

• Foundation – Tennessee’s clay soil and freeze-thaw cycles cause foundation issues
• Roof – Tennessee storms and hail can damage roofing materials
• HVAC system – Critical in Tennessee’s hot, humid summers
• Plumbing – Check for polybutylene pipes common in 1980s Tennessee homes
• Electrical – Older Tennessee homes may need panel upgrades
• Moisture/mold – Tennessee’s humidity creates basement and crawl space issues
• Termites – Very common in Tennessee; separate WDO inspection recommended
• Radon – Can be present in Tennessee homes

🏠 After the Tennessee inspection:

• Review the report – Your Tennessee agent helps prioritize issues
• Request repairs – Focus on major Tennessee-specific issues (foundation, roof, HVAC)
• Renegotiate price – If Tennessee inspection reveals major problems
• Ask for credit – Tennessee sellers may prefer giving money for you to fix items yourself
• Walk away – If problems are too severe and seller won’t negotiate

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Step 7. Get a Home Appraisal in Tennessee

Your Tennessee lender orders an appraisal to make sure the home is worth what you are paying. This protects both you and the lender. In Tennessee, appraisals typically cost $400-$600 and are paid by the buyer.

📊 What Tennessee appraisers check:

• Home’s size, condition, and features
• Recent sales of similar Tennessee homes nearby (comps)
• Tennessee market trends and neighborhood
• Any Tennessee-specific issues (flood zones, foundation problems)

⚠️ If your Tennessee home appraises low:

• Pay the difference – If you have extra cash and love the Tennessee property
• Renegotiate price – Ask Tennessee seller to lower price to appraised value
• Meet in the middle – Split the difference with Tennessee seller
• Challenge the appraisal – If you think Tennessee appraiser made errors
• Walk away – Use appraisal contingency to cancel without penalty

In Tennessee’s current market with prices stabilizing, low appraisals are less common than during the peak, but they still happen, especially in rapidly appreciating areas like Nashville’s suburbs.

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Step 8. Finalize Your Tennessee Mortgage

After the appraisal, your Tennessee lender will process your loan through underwriting. The underwriter reviews all your documents to make sure you can afford the mortgage. This takes 1-3 weeks in Tennessee.

📋 Tennessee underwriting process:

• Verify your Tennessee employment and income
• Check your credit again
• Review all Tennessee financial documents
• Confirm the Tennessee home’s value and condition
• Make sure you meet Tennessee lending requirements

🛑 Don’t do these things during Tennessee underwriting:

• Make large purchases or take on new debt
• Change jobs or quit
• Move money between Tennessee bank accounts without explanation
• Miss any bill payments
• Open or close credit accounts

For Tennessee THDA program buyers: Your THDA-approved lender will coordinate with the Tennessee Housing Development Agency to finalize your Great Choice loan and any down payment assistance. Make sure all your THDA homebuyer education certificates are submitted on time.

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Step 9. Get Homeowners Insurance in Tennessee

Before closing in Tennessee, you must have homeowners insurance. Tennessee lenders require proof of insurance to protect their investment. In Tennessee, expect to pay $1,200-$2,000 per year for homeowners insurance, though rates vary by location and coverage.

🏠 Tennessee homeowners insurance covers:

• Dwelling – Rebuilding your Tennessee home if destroyed
• Personal property – Your belongings inside
• Liability – If someone gets hurt on your Tennessee property
• Additional living expenses – If you can’t live in your Tennessee home during repairs

🌪️ Tennessee-specific insurance considerations:

• Tornado coverage – Usually included in standard policies, but verify coverage limits
• Flood insurance – NOT covered by standard policies; separate policy required in flood zones (common near Tennessee rivers)
• Hail damage – Important for Tennessee roofs; check deductible
• Foundation coverage – May have exclusions; important in Tennessee’s clay soil areas

💡 Shop around for Tennessee insurance:

• Get quotes from at least 3 Tennessee insurers
• Ask about bundling with auto insurance for Tennessee discounts
• Consider higher deductibles to lower premiums in Tennessee
• Check for discounts (security systems, new roof, etc.)

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Step 10. Understand Commission Savings in Tennessee (Rebate Alternative)

Tennessee is one of 9 states where traditional commission rebates are illegal. However, Tennessee buyers can still save thousands through a legal alternative structure that achieves the same financial benefit.

⚖️ Tennessee’s Rebate Law:

According to the Tennessee Real Estate Commission (TREC), agents cannot directly give commission rebates to buyers or pay their closing costs. However, Tennessee law allows agents to:

• Reduce their commission rate
• Structure the transaction so sellers credit the difference to buyers

💰 How Tennessee’s Legal Alternative Works:

Instead of a traditional rebate, Tennessee agents can request a lower commission and require the seller to apply the savings to the buyer’s closing costs. This is fully compliant with Tennessee law and achieves the same savings.

Example on a $394,400 Tennessee home:

Scenario	Commission	Buyer Benefit
Traditional (3%)	$11,832	$0
Reduced (2%)	$7,888	$3,944 closing credit
Reduced (1.5%)	$5,916	$5,916 closing credit

Result: You save the exact same amount as you would with a rebate in other states, but it’s structured as a seller closing cost credit, making it legal in Tennessee.

🔍 Important Tennessee Requirements:

• This structure must be included in the purchase agreement
• Your Tennessee lender must approve the arrangement
• The savings appear as a closing cost credit on your Tennessee HUD-1 statement
• Work with THDA-approved lenders who understand this structure

Finding Tennessee Agents Who Offer This:

Look for Tennessee agents who:

• Explicitly mention “reduced commission” or “closing cost credits”
• Are familiar with Tennessee’s rebate prohibition and legal alternatives
• Work with THDA-approved lenders who accept this structure
• Can explain exactly how the savings will appear on your closing statement

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Step 11. Close on Your Tennessee Home

The final step is closing on your Tennessee home. This is when ownership officially transfers to you. Tennessee closings typically happen at a title company or attorney’s office and take 1-2 hours.

📋 Before your Tennessee closing:

• Final walkthrough – Make sure the Tennessee home is in agreed condition
• Review closing disclosure – Check all Tennessee fees and numbers (sent 3 days before closing)
• Wire closing funds – Tennessee title companies prefer wire transfers for security
• Get cashier’s check – If not wiring funds to Tennessee closing
• Bring photo ID – Required for Tennessee closing

💵 Tennessee closing costs typically include:

• Lender fees (origination, underwriting, points)
• Title insurance and search fees in Tennessee
• Tennessee recording fees and transfer taxes (vary by county)
• Attorney fees (if used in your Tennessee transaction)
• Property taxes (prorated for your Tennessee county)
• Homeowners insurance premium (first year in Tennessee)
• HOA fees (if applicable in your Tennessee community)

Total Tennessee closing costs: Expect 2-5% of purchase price. On a $394,400 home, that’s $7,888-$19,720. Your reduced commission arrangement can offset much of this.

🏠 At your Tennessee closing:

• Sign all Tennessee legal documents
• Review your Tennessee closing disclosure
• Pay remaining Tennessee closing costs
• Get the keys to your Tennessee home!
• Verify the commission savings credit appears correctly on your Tennessee HUD-1

✅ After Tennessee closing:

• Set up utilities in your Tennessee home
• Change locks for Tennessee security
• Update your address with USPS
• File homestead exemption for Tennessee property tax benefits
• Keep all Tennessee closing documents safe